Small company
Also called: Small private company
Under Section 2(85) of the Companies Act, 2013, a company other than a public company whose paid-up capital and turnover are both within the prescribed limits.
Explained
Section 2(85) of the Companies Act, 2013 defines a small company as a company, other than a public company, whose paid-up share capital does not exceed fifty lakh rupees or such higher amount as may be prescribed, not exceeding ten crore rupees, and whose turnover as per the profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed, not exceeding one hundred crore rupees. The working limits are those currently prescribed by the rules within these statutory ceilings.
Three conditions follow. The company must not be a public company, so a small company is always a private company or a one person company. Both the capital and the turnover tests must be met, because the clauses are joined by and. The company must not fall within the proviso, which excludes a holding company or a subsidiary company, a company registered under Section 8, and a company or body corporate governed by a special Act.
The status brings lighter compliance. Under the proviso to Section 2(40), the financial statement of a small company may omit the cash flow statement. Under Section 173(5), a small company is deemed to have complied with the board meeting requirement if it holds at least one meeting in each half of a calendar year with a gap of not less than ninety days. Section 233 allows a fast track scheme of merger or amalgamation between two or more small companies without the full procedure of Sections 230 to 232.
Examiners test the exclusions most often. A private company within the limits is not a small company if it is a holding company or a subsidiary company, is a Section 8 company, or is governed by a special Act. Remember also that the definition is relative to the preceding financial year's turnover, so the status can change from year to year.
What the law says
(85) “small company” means a company, other than a public company,—
(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than [ten crore rupees]; [and]
(ii) turnover of which [as per profit and loss account for the immediately preceding financial year] does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than [one hundred crore rupees]:
Clause (85) defines small company; clause (40) proviso on cash flow statement
(5) A One Person Company, small company and dormant company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days:
Provided that nothing contained in this sub-section and in section 174 shall apply to One Person Company in which there is only one director on its Board of Directors.
Sub-section (5): relaxed board meeting requirement
(1) Notwithstanding the provisions of section 230 and section 232, a scheme of merger or amalgamation may be entered into between two or more small companies or between a holding company and its wholly-owned subsidiary company or such other class or classes of companies as may be prescribed, subject to the following, namely:—
(a) a notice of the proposed scheme inviting objections or suggestions, if any, from the Registrar and Official Liquidators where registered office of the respective companies are situated or persons affected by the scheme within thirty days is issued by the transferor company or companies and the transferee company;
(b) the objections and suggestions received are considered by the companies in their respective general meetings and the scheme is approved by the respective members or class of members at a general meeting holding at least ninety per cent. of the total number of shares;
Fast track merger between small companies
For the exam
- Section 2(85): not a public company; capital and turnover both within limits.
- Statutory ceilings: capital up to 10 crore rupees and turnover up to 100 crore rupees, as prescribed.
- Excluded: holding or subsidiary companies, Section 8 companies, special Act companies.
- May omit the cash flow statement (proviso to Section 2(40)).
- Two board meetings a year, one in each half, 90 days apart (Section 173(5)); fast track merger (Section 233).
7 questions in the Law Maker question bank use this term. Practise Company Law questions
Related terms
- Private companyA company whose articles restrict share transfer, limit members to two hundred (except a One Person Company) and bar public invitation to subscribe for its securities. Section 2(68), Companies Act, 2013.
- Public companyUnder Section 2(71) of the Companies Act, 2013, a company that is not a private company and has the prescribed minimum paid-up capital, including a subsidiary of a non private company.
- One Person CompanyUnder Section 2(62) of the Companies Act, 2013, a company which has only one person as a member. It is a form of private company formed under Section 3(1)(c).
- Independent directorA director, other than a managing, whole-time or nominee director, who meets the independence criteria in Section 149(6) of the Companies Act, 2013 (Section 2(47)).
- Government companyA company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, one or more State Governments, or both, including a subsidiary of such a company.
Further reading
Checked 6 November 2026. Statutory text is quoted from the Bare Acts library, taken from India Code. See the full glossary.